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Debt Management Strategies: Select the One that is Right for You
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Debt Management Plans: Choose the One that is Right for You
Compare various debt management plans' features and prices to determine the best fit.
By Sean Pyles Senior Writer | Personal finances, debt Sean Pyles leads podcasting at NerdWallet as the host and producer of the NerdWallet's "Smart Money" podcast. On "Smart Money" Sean talks with Nerds across NerdWallet's NerdWallet Content team to answer listeners' personal finance questions. With a focus on thoughtful and practical advice on money, Sean provides real-world guidance to help people improve their financial lives. In addition to answering listeners' financial questions on "Smart Money," Sean also interviews guests who are not part of NerdWallet and creates special segments to explore topics such as the racial gap in wealth, how to start investing, and the history of student loans.
Before Sean was the host of podcasting for NerdWallet, he covered topics that dealt with consumer debt. His work has appeared throughout the media including USA Today, The New York Times and other publications. When Sean isn't writing about personal finances, Sean can be found digging around his garden, taking walks, or walking his dog for long walks. Sean is located at Ocean Shores, Washington.
Updated on Aug 17, 2021 9:47PM PDT
Edited by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring financial management and debt Kathy Hinson leads the Core Personal Finance team at NerdWallet. In the past, she worked for 18 years with The Oregonian in Portland in capacities such as chief of the copy desk and team director of design and editing. Prior experience includes news and copy editing for various Southern California newspapers, including the Los Angeles Times. She received a bachelor's degree in mass communications and journalism in the University of Iowa.
A majority of the items featured on this page are provided by our partners who compensate us. This influences which products we write about and the location and manner in which the product is featured on the page. But, it doesn't influence our evaluations. Our opinions are our own. Here's a list and .
Are you feeling overwhelmed by burden of debt? A debt management strategy could be the answer.
This debt payoff tool puts you on a path to pay off credit card debts, typically credit cards in the course of three or five years. With the help of a DMP, several debts are put into one payment and creditors reduce your interest rate. In exchange, you sign the payment plan which typically lasts between three and five years. Keep in mind that interest rate reductions are uniform across credit counseling agencies, based on your creditors' guidelines and your budget.
Here's a comparison of the debt management plans at some important nonprofit .
Agency / availability
Average fees
Available in 50 states
The cost of the initial fee is $31.
20 monthly fees
All states are covered, with the exception of Minnesota
$42 startup fee
A monthly payment of $30
Available in 50 states and Puerto Rico
A startup charge of $24 is included.
$28 monthly fee
In 50 States
$35 startup fee
A monthly payment of $29 is available.
It is available in all 50 US states.
$35 for the initial fee
$ 24 per month for a monthly fee
Debt management strategies: pros and pros and
Pros:
Can cut your interest rate by more than half.
Helps pay off debt faster instead of doing it yourself.
Consolidates debts from several creditors into one installment.
Cons:
This is typically used to pay to pay off credit card debt. It can't be used to pay for student loans, medical debt or tax obligations.
It can take anywhere from three to five years, and you're generally unable to use credit cards or get new credit lines while in the plan.
Missing a payment can derail the plan and end your interest rate cuts.
It's time to cut your debt
Register to join the link and track everything from mortgages to cards all all in one location.
Do you think a debt management program is right for you?
DMPs may not be suitable for all. Depending on the agency, about 10% to 20% of clients are able to avail this option for debt relief. Of those who do, about 50% - 70% have completed the program, based on the time of year and the method by which the agency records accomplishments.
You may want to consider the possibility of a DMP If:
Unsecured debt, such as from credit cards, is between 15% and 39% of your annual income.
You have a steady income and believe you can pay off your debt in five years if you had an interest rate lower.
You can get by without opening up new lines of credit while in the plan.
Alternatives to a debt-management strategy
DMPs do not always cover all expenses . The problem debt due to student loans and medical expenses are not covered by such plans. Other options:
If the amount of debt you are struggling with is less than 15% of your annual income, you could take a DIY approach by using the method.
A , if you have good enough credit to qualify you can also combine the debts of several creditors into one with an interest rate that is lower. You can control how long the loan is and retain your ability to open new credit lines.
You may want to consider this option if your debt is greater than 40 percent of your income, and you have no means of paying the debt off in five years. A debt reduction tool will rapidly give you a new start. Consumers have credit scores that begin to rise in as short as six months.
What are the things you'll need to do to get started
If you believe a DMP might be your best choice for debt relief, start by . Consider:
Certification and accreditation : Look for an agency that's part of the . They require agencies to be recognized by an independent body as well as both require certification as well as a standard level of quality for counselors.
Access: Ask yourself which method you'd prefer to use to get services: via phone, in person or online.
Cost: Fees differ based on agency, the state you live in and your financial need. Before signing up, verify how much you'll pay each month toward your debt as well as fees.
Author bios: Sean Pyles is the executive producer and host of NerdWallet's Smart Money podcast. His writing has been featured in The New York Times, USA Today and elsewhere.
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